On multiple occasions I’ve had conversations with those older and more experienced than I about the power that business has to create change in the world. And on multiple occasions I’ve been faced with the same critical response: “It’ll never happen. Businesses only care about the bottom line.”

Maybe I’ve spent too long on a university campus that prides itself on social entrepreneurship, but if there’s anything I’ve learned in business school it’s that profit and competition rule the business world. And while members of an older generation may point to those two concepts to refute the notion that business can create social change, in my eyes these concepts do nothing but strengthen the case.

Of course, an economically sustainable business cannot exist without turning a profit, but why can’t making a profit and making a difference go hand in hand? In today’s world of greenwashing and excessive cause marketing it is hard to identify which companies are truly trying to create social change. However, it is clear that there are, in fact, a number of large companies who are genuinely interested in making a difference. Starbucks and Whole Foods are two companies that pride themselves on sourcing materials in an environmentally and ethically responsible manner. Both carry strong brand names and are perennially listed on the Fortune 500. Ben & Jerry’s and Method cleaning supplies are examples of other companies that were founded on the basis of doing good, yet maintain strong financial performance. I could go on and name more, but these companies have proved time and again that making money and making a difference can truly coexist.

Knowing that companies can be profitable while making social impact is the perfect ingredient to vouch for the impact of the second important component of business – competition. The beauty of competition is that it drives innovation. Just look at today’s smartphone market. Many experts in the field now believe that the Samsung Galaxy S4 is a far greater phone than the iPhone 5. But imagine a world in which Apple never created the iPhone. Would Samsung have ever even thought to create a phone with touchscreen technology, let alone one that would be as good as what the Galaxy is today?

Now imagine if the forces of competition were used for the sake of creating social change. Imagine if a car company created a car with zero fuel emissions causing a competitor to make an even better and more affordable one. Imagine if a real estate company found a way to build affordable housing for the homeless causing another company to find an even better way. Imagine the social impact that could be created through social innovations inspired by competition!

Fortunately, many of today’s most successful businesses are already taking a genuine interest in creating social impact. If my business education is correct the competition is sure to follow, and pretty soon we might be living in a much better world.

Aaron Czinn graduated from the Robert H. Smith School of Business at the University of Maryland in May 2013. He hopes to blend his Marketing and Information Systems majors into developing digital marketing strategies for socially conscious businesses in the real world.

3 Responses to “Profit and Competition: the Keys to Social Change?”

An interesting way to look at competition, Aaron. I think we’d agree that competition flourishes when there’s money to be made. I’d argue that fields where social impact leads directly to increased profitability (fuel efficient vehicles, organic cleaning and food products) are already flourishing. Now what we need to consider are the fields where social impact does not yet lead directly to increased profitability. Affordable housing is, by definition, less profitable than regular housing. My question is, how do we change the incentive structure so that social impact in these fields is more profitable? Or maybe the answer is that some areas of social impact are meant for non-profits. Then the question becomes what does the innovation equation look like without profitability?

I think your point is valid now and will become more so as time tests the goodwill vs profit motive. Just this week Whole Foods announced that it would not be carrying chobani products anymore because there were not No GMO, and more importantly they are seen as successful enough as to not “need” help from Whole Foods. Instead whole foods will use their space for more local sourced, small farms. This is truly not a profit move, to dump a brand for overachieving. But whole foods has it’s core mission at stake if it lines it’s shelves with everyday mainstream products that can be purchased elsewhere, and squeezes out the little guy. So, yeah, good can triumph profit, as long as it still enables it.